REFILE-China Minmetals calls for rare earth production suspension

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(Refiles to reference 2011 quotas in second bullet point)
* State-owned trader urges rivals to halt production
* 2011 production quotas already met
* Processors in Jiangsu already closed for tech upgrades
By David Stanway and Ruby Lian
BEIJING, Aug 3 (Reuters) - State-owned trader Minmetals
has called on all firms in the rare earth sector to
adhere to a national output quota by suspending production
starting from the beginning of August.
"We propose that production should be proactively halted with
immediate effect at the beginning of August 2011 in order to
guarantee the stable operation of the rare earth market," the
company said in a notice posted on its website
(www.minmetals.com.cn) on Tuesday.
He Jinglin, spokesman for Minmetals, told Reuters that while
Minmetals doesn't operate any mines of its own, its separation
plants would be affected by any suspension.
Minmetals, which aims to take advantage of Beijing's
industry restructuring plans by becoming one of China's biggest
rare earth producers and processors, has already halted
operations at its processing plants and wants other companies to
follow.
But the spokesman said it remained unclear whether they
would make a similar pledge.
"Right now this is just a proposal," he said.
Mandatory limits on rare earth mining have already led to
shortages at a number of processing facilities, and a nationwide
production halt would prevent Minmetals' rivals from turning to
the black market to keep their plants running.
Chinese media reports suggested that rare earth companies
have already reached an annual production quota set by the
government, which allows for the production of 93,800 tonnes of
rare earth oxides for all of 2011.
Although output has been restricted as part of a campaign to
impose order on a notoriously ill-regulated sector, Chinese
miners have routinely exceeded their production permits.
The Ministry of Industry and Information Technology imposed
a quota of 89,200 tonnes in 2010, but actual output reached
around 130,000 tonnes, according to figures from the China Rare
Earth Society cited on Wednesday by the China Securities
Journal.
Minmetals urged the sector to comply with the production
plan imposed by the industry ministry in March, and also called
on companies to "strictly implement state and regional pollution
standards and reduce environmental damage during the course of
production."
Eastern China's Jiangsu province, which hosts 10 large-scale
rare earth separation plants, has already suspended production
at the majority of its smelters in a bid to meet new
environmental standards, a local official said on Wednesday.
"The majority of rare earth separation plants have suspended
production for around one month, and are upgrading their
facilities and technology to meet the government's higher
standards," a spokesman for the Jiangsu Rare Earth Association,
surnamed Cai, told Reuters.
Cai said China would issue new standards for rare earth
producers in November, but he added that Jiangsu had no
timetable for resuming operations.
"China's strict curbs on rare earth mining this year has led
to a supply shortage for separation plants," Cai added.
CRACKDOWN
China has justified its crackdown on the sector by saying
that high levels of output were unsustainable and that
unregulated mining was ruining its environment.
But it has also complained that despite being the world's
overwhelmingly dominant producer, it has lacked pricing power
over a range of 17 elements used in industries such as defence
and renewable energy.
China accounts for 97 percent of global rare earth
production, and overseas governments have accused Beijing of
deliberately withholding supplies in order to push up prices and
improve its own competitive edge in products such as wind
turbines and hybrid vehicles.
China has issued total export quotas of 30,184 tonnes this
year, slightly lower than the 30,258 tonnes issued last year.
But according to industry estimates, another 10,000 tonnes
was illegally exported in 2010, prompting Beijing to begin a
crackdown on smuggling in the sector.
The government's efforts to bring the industry under more
control include a plan to set up a state-owned monopoly in Inner
Mongolia, where the vast majority of China's rare earths are
produced.
It has also banned the prospecting of new rare earth
deposits until 2012 as it draws up new environmental standards
for the sector.
The following table lists rare earth mining quotas for each
province and municipality in China in 2011.
Region Light Medium/heavy
rare rare earth
earth
Inner 50,000
Mongolia
Fujian 2,000
Jiangxi 9,000
Shandong 1,500
Hunan 2,000
Guangdong 2,200
Guangxi 2,500
Sichuan 24,400
Yunnan 200
Subtotal 80,400 13,400
Total 93,800
Unit: tonne
Source: China's Ministry of Land and Resources
(Reporting by David Stanway in Beijing, Ruby Lian in Shanghai
and Polly Yam in Hong Kong; Editing by Ken Wills)